tax questions?

Question

i just started a job for a carrier or messenger company, where i use my own car for my job. what can i get back at the end of the year? what receipts should i keep? i do live in california

Answer 1

If you keep a mileage log that supports the business miles (not commuting), you can choose to deduct 48.5 cents/mi. or apportion your actual expenses based on business/total mileage. When you pick one method over another, you are stuck with that method for the life of the car.

Once you calculate the deduction, it will flow through to schedule A of your return, less 2% of your AGI. Assuming you already itemize and make say $50,000, you would need to rack up 2,000 mi. before you reach any benefit (though tax prep fees and a few other deductions can offset the 2% level.

I would suggest your talk to your employer regarding an accountable reimbursement plan. Even if it means your salary is less, it maybe worth having your employer require you turn in mileage logs on a monthly basis from which the company reimburses you at a standard rate. If the rate is above 48.5 cents/mi., the excess is W-2 income. If the rate you are reimbursed is less, the difference can go to schedule A. These reimbursements under an accountabl plan are not part of your W-2 income so it essentially gives you a deduction without the hassel. Remember though- under an accountable plan, the employer must only reimburse you for supported expenses, not a flat rate of "$500 a month." Any such plan would result in the entire amount being wages no matter what your turned in.

If you need to sell your employer on implementing an accountable plan, point out that by doing so, the employer will save money on employment taxes, but still get the business deduction of what leaves the company's checking account. This benefit is of course only if the employee's wage is lowered to account for the reimbursed mileage.

Answer 2

Keep a log with you at all times, record your mileage each time you go from business to personal and back again. Compute your business mileage at year end then you can deduct 48.5 cents per mile for business mileage. Remember commuting isn't a business expense so from home to the job and from your last stop to home is personal.
Or you can compute the percentage of business use and use actual expenses including depreciation you will need accounting help.